Oil jumps to three-month high after US stock draw
LONDON — Brent crude oil hit a three-month high above $113 per barrel on Wednesday after US data showed domestic crude stocks fell sharply and as concerns deepened over the immediate outlook for North Sea oil production.
US crude oil stocks fell 3.73-million barrels to 369.86-million in the week to August 3, the Energy Information Administration (EIA) said, well above an expected draw of 0.3-million barrels.
The data followed industry figures published on Tuesday that showed an even bigger fall in crude inventories and reinforced a market view that fuel supplies were tightening in the world’s biggest oil consumer.
News of a fall in scheduled North Sea crude oil production in September also helped support the market, traders said.
Brent crude futures for September rose $1.18 to $113.18, their highest since early May, before easing back to about $112.70 by 3pm GMT. US crude was up 30 cents at $93.97 after earlier jumping more than $1 to a high of $94.73.
"Today’s larger-than-expected draws across the board have initially added to a complex already gaining strength, leading to new highs in the process," said Jay Levine, broker at Enerjay in Portland, Maine. "Fundamentally these numbers add fuel to the fire of a rising market."
Brent has risen more than 25% since the end of June, partly on expectations the world’s largest economies would take more measures to stimulate growth.
Hopes for further rounds of quantitative easing (QE), moves that are likely to support commodities, have increased investors’ appetite for riskier assets.
"The oil market is looking for reasons to be bullish," said Eugen Weinberg, global head of commodities research at Germany’s Commerzbank in Frankfurt. "Risk appetite is back and I wouldn’t be surprised if this rally continues for a while."
European Central Bank president Mario Draghi said last week the ECB could again start buying government bonds, but details of how it would stabilise the bloc’s debt markets are unclear.
A top US Federal Reserve official said on Tuesday the central bank should launch another bond-buying programme sufficient to get the economy back on its feet.
Brent has found support from news of a major round of maintenance in the North Sea over the next two months, which will cut to a record low production of the four grades of crude that underpin the benchmark contract.
North Sea crude oil output from 11 production streams is set to fall by 17% in September due to oilfield maintenance and natural decline, adding to signs of a shortage that is supporting Brent crude prices.
The price spread between September and October Brent contracts widened to $1.70, up from a backwardation of $1 last week, pointing to strong prompt demand.
A fire at a Chevron refinery in California also supported crude prices and caused regional gasoline prices to spike.
The EIA said in its weekly report that both US crude oil and gasoline inventories fell far more than forecast last week, while distillates posted an unexpected draw.
Gasoline inventories slumped 1,8-million barrels, against forecasts for a draw of 1,1-million barrels, the report showed. Distillate stockpiles, which include heating oil and diesel, fell 724,000 barrels, compared with forecasts for a build of 600,000 barrels.